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tv   [untitled]    May 16, 2014 7:30am-8:01am PDT

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a three-year final comp plan. these changes were designed to provide fair benefits but obviously lower the level of benefits that are available to retirees once they retire. our total membership exceeded 60,000 for the first time this year. we have under 35,000 active non-retired employees. some of those will include folks that have vested and left their money on account with the plan. they may not be working for the city but have rights to come back and claim benefits. and we have 26,000 retired members and we have a retiree payroll of over $1 billion. the next page is trends over the last five years. again we have a total active
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membership broke out by active and vested and reciprocal members. active members over a five-year period are still in a decrease from the level of active employees we had as members in 2008-09. and you can see the effects of the streamlining of the positions. going through and coming out of that difficult period. we also show the active to retiree ratio and you see that it's steadily declining but not as quickly over the last three years in the prior two years of this five-year snapshot. and you will notice that retired members increase by over 16% over the same five-year period. and that we continue to have a net increase, we measure obviously some retirees will end
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up eventually dying. but we still have a net increase of nearly 1,000 a year of retirees going into payment status. the next page tracks the funding levels over the last five years. you notice in 2008-09, we had market values assets just under $12 billion. and that was the end of the difficult financial markets in 2007-09. >> mr. chair, excuse me, as i benefit of the public, these slides should also be on the projector. >> asking you to go to the
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projector, please. >> right. >> again pointing on this column, the market value assets at the end of the financial, what they call the great recession, just under $12 billion. and then increasing to $17 billion which reflected a market value funding status of 84%. i am happy to report with the markets so far this year, through the end of april, we have exceeded $19 billion in assets. and on target to return over 14.5% return for the current fiscal year. again as long as the financial markets hold through june 30, it
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seems arbitrary but that is the time that we do a snapshot and measure the health of the plan. so over the four years since the great recession, as it's called, we have increased the market value of this trust approximately 5.1 billion. and at the same time over this same period we paid in excess of 3.5 billi$3.5 billion in benefi. >> can you talk about the difference of actuary value and market value. >> the actuary is what they determine it will grow, which is currently 7.58%, and each year they will assume over that previous year that it grew at that rate. we used to regularly be when we are better funded have more
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market value of assets than actuary of assets. the important part is that actuary assumes that we have the actuary value, and when actuary exceeds market value as it did in 2008 and 2009. i am happy to report for fiscal year 2012-13, now the market value of assets is $17 billion, and the actuary value is 16.3. again we don't have to make, we are investing more money than the actuary assumes we have and make it easy to meet the target of 7.5. and we are making 14.5 through
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the end of april. >> not predicting a dive in the market, that will continue to compound itself. >> what happens once we invest more than the actuary assumes and hopefully make the gap larger, and that we are meeting the required return assumption, b bah -- because we are able to invest more than the actuary. and they measure the assumptions and grow the trust based on 7.75 as it was in the 2008-09. >> can you remind me what we obligated as the city to fund, don't we have a requirement? >> yes, there is a required per contribution that is currently
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28%, and however with the cost sharing where the active employees based on their salary level have an additional contribution, the net number is 23 or 24. >> is there a funding level market or actuaryial that we hold? >> the charter doesn't require that there be 100% funding, the charter requires that the retirement board has a plan in place with a goal to pay dollar for dollar the promised benefits. what we have is projected liabilities for every dollar of pension that we anticipate we will have to pay for the retired as well as all active employees of $20 billion. in order to get to 100% funding level, the market value of those assets would have to match the actuary match would have to match. >> got it. >> there are some triggers for
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cost of living adjustments that are now based on whether the plan is fully funded. and those changes were made at the same time. we are very cognizant we have an improving market value ratio, from 79% to 84% in one year, and we anticipate that we will see again the same reaction. obviously our goal is to get both market value and actuary funding to 100%, that means we have a dollar for every dollar promised to the employees. >> thanks. >> the retirement board also administers the city's employment plan, establish in april, we have 42,000 active
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participants and 25,000 participants that are not currently deferring but have assets in the plan. and we have assets in the program as of april 30, $2.6 billion. this is part of the retirement plan budget, it's separate because we don't use trust monies for the program. however pointed out in the report, the activities of this program are completely reimbursed by the third-party administrator, currently prudential, by contract they reimburse the city for the cost of this plan. this is our 2014-16 budget
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outlook. the two-year outlook is all costs that support the administration program and paid on the trusts. all costs of administering the comp plan is reimbursed by the third-party administrator. no general fund used to support this department's budget. this year we have asked for a large number of new positions. the result of the retirement board making decisions as it faced the 2014 asset liability modeling study. we do this every three years. and part of the analysis is they are directing us to go and investigate three new investment strategies for the trust. they include what we call alternative equities. and they include hedge funds and they also include investment in
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real assets. not real estate, more infrastructure, timber, those types of things. the board is determined that we need to bring on staff to support the implementation of these strategies. for example, in the hedge fund are arena, if we didn't have staff on board, the option would go fund-to-funds. and there is additional costs associated fund-to-funds, and the board believes that the savings will multiple times over support the cost of these new positions. there are seven new positions in the division, and five to be funded in 2014-15, which is targeted what the board set as a priority of starting in hedge funds and equity. and two in the year 2015, that
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is a reflection of investment not just real estate but real assets. there are two positions in the retirement services area of our budget that we are requesting. senior management assistant, and that's for fiscal year 2014-15, and 15-16, a principal program analyst in support of our development team, which basically supports our application, pension administration application. and there is one 1842 management assistant that is requested in the administration division to support the executive director and his immediate office. that is a result that we had over the last two budget cycles eliminated executive secretary positions from our budget. we wanted a closer skill match.
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so we are bringing back the management assistant. we have money in our budget that includes an allocation for the mayor's summer youth program. we have an overtime budget of $5,000, and generally speaking we manage it very well. we have never exceeded that in any budget year in the last 15 years. and also thanks in part to supervisor avalos's effort, we are confident that we will bring the monthly retirement board meetings to a chamber here in city hall so they will be televised live. and we have money in the budget to support that. and we conduct committee me meetings and we have the money in the budget for televising those meetings.
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i will be happy to answer questions. >> thank you, any questions? move on to the next report, please. >> members of the committee, does the department have comments? >> will you come up the budget analyst has made a few recommendations to your budget. why don't we go through your report and ask afterwards. >> mr. chairman and members of the committee. on page 5 of our report, we state that the recommended deductions, of the 1.06 million and 706 are ongoing savings and 937 are one-time. and allowing an increase of 17.1% of the department's 14-15 budget. our recommended reductions total 689,five 17, and in 15-16, all
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of which are ongoing savings. my understanding, supervisors that the department did concur or has concurred with our recommendations. however i want to point out one recommendation on page -- actually it's on page 7, it's the last recommendation that we made. it's a recommended deduction of $945,360. we were advised that the real estate division had some questions about that, and we are happy to work with the real estate division regarding a tenant improvement of 945,360 if the director so directs. >> director. >> i couldn't have said it better, we believe we're in agreement and were notified by the real estate division, and
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their concerns, and prepared to work with the budget analyst and come back next week. hopefully with a recommendation to respect. >> to be gray, and you are in agreement and real estate affects you, don't get me wrong, that's a question and leave it open until next week. to give your office the time to discuss. >> exactly, and if the committee wanted to and up to the committee -- okay. just leave it like that. >> okay. >> okay, colleagues any questions? supervisor avalos. >> just for director huwis, appreciate the effort to televise and do so in city hall, probably just like a phone call away to start off the discussions, thank you. just if you could summarize your
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work doing more work in staff, but yet still maintaining consultants. that was mentioned in the budget analyst report. how do you see that trend moving towards the in-house staff replacing consultants? do you have expect to have a high level of consultants in years to come or the model for future years? >> supervisor, thank you for the question. the retirement board understands that we are a $19 billion fund. and we always had a model of all of our investment recommendations were consultant driven. and over the years we have had to build staff to support the implementation of certain programs. the retirement board understands now that it's more important for them to invest in a more staff driven. having staff doing the heavy lifting, and have a consultant
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there in a secondary role. you are absolutely correct. this is not going to happen, there is not a matching offset for the consultant fees until we have the staff to do the heavy lifting. we anticipate over time as staff is built and becomes more engrained in the process. and the model now is that there is a part of the budget that the board of supervisors doesn't see. but we have had increases in our travel expenses. because now staff members are expected to be out of the office. visiting their managers, and doing the due diligence probably 10 days out of every month. that was not the model and relied on consultants do that, and to answer your question we hope to reduce the role of the consultant and the fees. but the retirement board has made a decision that they want to invest in staff. we want to build a staff
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structure where we can have the interest of very qualified people and have them stay. typically you know they can make a good portfolio manager and make multiples of money. more money working in private industry. so what we are trying to do is build a structure and career path, and trying to keep then longer than three to five years and want to build a strong team. thank you for the question and a direction that the board has seriously considered and decided to pursue. the staffing for the investment division will now be 22, with these new positions. and you know three years ago it was seven. and as again to be responsible for the investment of a $19 billion fund, 22 is still a very sparse showing. but i think it's a move in the right direction. and the board obviously has directed us to provide a budget
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that will support that. over the years i have seen discussions about going into strategies. their first question is if we have the internal resources to support it, and if yes, they would proceed and if no, they would back away. we are trying to build capacity for the board to go in any direction they want to go. >> if i can put in-house staff that you bring on in 15 years, if you can have staff with understanding and expertise in the carbon bubble. >> absolutely. >> i was excited about the university of stanford, last week they invested interest which is exciting. there are trends out there that our entire report system can get on. >> and we are also bringing on a city hall fella that will be
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working with staff investment, as well as operational staff. as coming up with more of an integrate -- integral approach so that the board can consider climate risks and if we invest our money with certain managers after a time that we allow those folks to invest. we anticipate that will be a high-priority initiative over the next year, to bring back to the board policy that would include environmental issues and climate risks. >> thank you. >> colleagues, any questions? okay, thank you. much appreciated. at this point in time we will move on to the mta, thank you for being with us. >> thank you, good morning, chairperson farrell and members
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of the committee, ed riskin from mta, i was here a month ago and gave you a preview where things have headed. things have largely stayed in place and report what happened on may 1, and happy to take questions with a presentation and can takes questions as you wish. to remind you the budget development process and everything we do is guided by our vision, goals and values, which are shown here on the slide. this is the framework in which we go about developing the budget, making operational decisions and policy decisions and of course budget decisions. this slide just shows some of the magnitude or the breadth of what the agency is responsible for, a lot of service and a lot of assets and parts of the
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transportation system that the voters have placed in our care. and that's what is being able to serve all of these needs, or what is driving our budget. i may have covered this last time, but it bears repeating in term s of muni, dh is the line share of the department and budget, this slide gives a picture of who we are serving, i like to think of muni as the transit service for 100%. we are definitely serving low income and very, low income people that don't have choices of how to get around the safety. the safety net service, the transportation is what people need to get to school and jobs. and this data shows, and based on a survey of 22,000 customers, and it shows that we have a lot of very low-income folks that ride muni and a pretty large
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percentage that don't own a vehicle, and likely don't have a lot of choices of how to get around town. one good thing we have found over the years from the rider survey that we do every two or three years, generally, that satisfaction with muni service is positive and increasing. it's maybe not where we want it to be, but coming up on two-thirds of folks saying that they are giving an excellent or good rating to their satisfaction with muni. that's something to feel good about. we do on an average weekday have more than 700,000 people boarding, it's a lot of people that we move around every day, and the one time when you have a bad experience is what resonates with you, and these numbers reflect by and large for the number of folks we are moving, we are doing so in a way that people are happy with. when we ask what do people want
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to see improved on muni. you can see kind of not surprising that the big ones are on-time performance and frequent service. but also cleanliness and crowding and reliability. and these are some things that we are trying to address with this budget, both capital and operating budgets. so supervisor avalos started a conversation a number of months ago about the equity of the service delivery of muni and of transportation service generally. and out of that process he convened a number of stakeholders, we have been working with that group over the last four or five months. and have developed a new framework for analyzing the equity of our service delivery. it's a process that we actually have formalized, brought it to our board of directors a week ago. they have adopted it.
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and so it will now be a part of what we do on an ongoing basis. what it does is look at a neighborhood basis of certain neighborhoods in the city, and look at performance characteristics of muni service in those neighborhoods. things such as on-time performance, gaps, crowding, and customer satisfaction, travel time. things that are important to muni riders, and what it does is compare to the system-wide average. and the idea being that to the extent that in any particular neighborhood we're not delivering the same level of service to another part of the city that we take action such as increasing the service or capital project to provide for
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service delivery. we would use this data and share it publicly to make corrections. and next slide is a sample of analys analysis, a couple of different neighborhoods and you see the metrics that we look at. and again as we do this process each year, we make adjustments that we are providing equitable access and focusing on the neighborhoods that are lower income and transit dependent. >> let me jump in, i want to thank you and your staff for doing this analysis, julie chrisbon was leading the effort and we were meeting with transit justice people and directly with you and alicia (inaudible) as well. i want to say thank you for that effort. i like the idea of focusing on
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on-time pitcheerformance and th level of riders. and also looking at the investment of capital made around the city. i have talked about this for years since i have been in office. the level of capital investments in district 11 and i would say district 11 is pretty minimal. there is capital investments that have gone in towards the green yard, and the facilities. but there hasn't been a lot of capital improvements that have come to make the experience of riders on the lines, mission, geneva or san jose, minor things here. and i see other parts of san francisco remarkable changing before my eyes. i think that's good. but we have to make sure that neighborhoods where we are so car dependent that we make those
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investments to provide a better alternative to people getting in their cars and riding muni. when i ride muni and as i said before the meeting, you get on the bus and there is very little white people on the bus, very little middle class on the bus. it's not considered an option for many people, because they haven't seen a real commitment to changing the experience getting on the bus. i find it convenient time wise to get to city hall and get downtown. taking muni. but the experience getting around is not one commenceary with other neighborhoods in san francisco. because of the facilities we have to get there. i want to make sure that great work on on-time performance but there are also capital investments that need to be made. and the analysis of how we
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invest in capital needs to be seen through an equity lens as well to a greater extent. overall i want to thank you for this work, and it's more to do around how we ensure that neighborhoods far from the downtown core and the essential core of the city can get better served with the capital investments we make. we don't have any complete streets in district 11. there are a lot of plans in place for pedestrian safety. but minimal things, spots here and there that are covered. but nothing comprehensive. i think we are feeling we are not getting well served in that regard from the rest of the city. frankly not much development but to see how development enabling in the core of the city can provide flexibility for funds to come to the outer parts of the city. >> thank you, i think t w
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